While we may think that our health insurance is more than sufficient, we need to think about protecting ourselves fully with additional insurance plans. For that reason, this article covers 4 important insurance policies for childless singles.
When you have a family, you’re probably aware of all the insurance types you should have to make sure your loved ones are protected. But what if you’re on your own? Although singles may not have the same concerns and commitments as married people, we nonetheless require insurance. Our requirements may just be a little different. Otherwise, we may not have the necessary coverage to protect our finances in the event of an unforeseen event. Or even worse, we may not be able to get the treatments we need to feel better quickly.
As a single person without children myself, these are the insurance policies we should consider:
Disability Insurance
The idea of not being to work might be scary, especially if you don’t have a secondary source of income that you can rely on during emergencies. And if you don’t have a substantial emergency fund to fall back on, being unable to work can be financially devastating for most people.
Assume you are in an accident and get injured. Or even more common, you just get sick and can’t work for a prolonged period of time. Disability insurance helps you cover your living expenses for a predetermined duration. Insurance companies offer different policies for short-term and long-term disability insurance, the two main types of disability insurance.
The difference between the two is, as you might expect, the length of payout time in case of an emergency. Short-term disability insurance can cover you for nine weeks to a year. If you have a substantial emergency fund, you may not even require short-term disability insurance. For example, if you can live without an income for six months, you can probably skip this type of insurance.
Long-term disability benefits, on the other hand, are available for two, five, or ten years, or until retirement. The amount you pay is determined by a number of factors:
- Your elimination period, which is the amount of time between the date of your injury and the start of the benefit payment,
- the benefit period, which is the amount of time you want the insurance to provide you with a payout, and finally
- the maximum benefit payment you can expect each month.
Many businesses will provide some type of short-term and maybe even long-term disability insurance. However, their coverage may be insufficient for your needs, because many plans cap their coverage at 50% of your current income. In order to maintain your standard of living when you are unable to work, you may consider purchasing supplemental disability insurance, which provides you with an added level of protection.
Long-Term Care Insurance
Imagine for a moment, that sometime in the hopefully very distant future, you require assistance with daily chores such as showering or eating. If you are single and don’t have children or a spouse to help you with such activities, you need to figure out how to pay for such costs. Depending on whether you are receiving care in an adult day care facility, a nursing home, or in your own home, you may face significant medical bills that your health insurance will not cover.
In such instances, long-term care insurance prevents you from depleting your retirement savings to cover the cost of care. Let’s imagine for a moment that you are recently retired and have $1 million in your retirement funds. And let’s assume you have a 4% annual withdrawal rate, which many financial experts deem sustainable. While the money should have lasted you 30 years, the additional expense of long-term care can substantially reduce that duration. What’s more, any hope of leaving a legacy behind begins to dwindle along with your retirement savings.
While most people start thinking about long-term care insurance in their 50s or 60s, I chose a plan in my late twenties as a package with my normal health insurance. Starting this early can often get you a great deal on long-term care insurance. If I needed to use the payment in a few decades from now, the insurance would pay for itself in only a matter of months.
Term Life Insurance
As a single person without children, you may or may not require life insurance, depending on your circumstances. While it is not deemed necessary when going through life on your own, the moment you find yourself having to support loved ones, you may want to consider getting a term life insurance policy that can protect you for a decade or more.
Especially if you have family members or friends who rely on your income, it may be wise to consider getting a term life insurance policy. There are several scenarios where this can make sense:
- You’re cosigned on any debts: If a family member or friend cosigned a loan for you and you die, the cosigner will be liable for the loan. In this case, if you don’t have enough money saved up to cover your loan, a term life insurance policy would protect your cosigner. This would prevent them from suffering a financially devastating loss aside from the emotional impact of losing you.
- You have a business partner: Especially true in the early stages of a company, your death might have a significant financial impact on your firm. In this case, a term life insurance policy can provide your business partner with the essential funds to cover all ongoing expenses while working out the future of your company.
- You’re a homeowner with a mortgage: Whether you’re leaving your property to benefit a loved one, family member, or placing it in a trust for your pet, make sure there’s adequate coverage to pay the remaining mortgage debt if you pass away before paying it off. Dependent upon the length of your mortgage, a 15-year or 30-year term life policy may be the best option to protect your beneficiaries.
Emergency Funds
While emergency funds are not exactly insurance, having a substantial amount of money saved up is critical when you’re single. Your financial stability is about as solid as a house of cards if you are the single income earner in your home and do not have an adequate financial cushion to cover the unexpected. By the time I hit my early-30s, I was able to save enough money to cover at least six months of living expenses. Anything less would make me quite nervous. Anything more would probably make Dave Ramsey really proud of me.
Final Words
Insurance is often easy to neglect because we usually don’t think about it when managing our everyday finances. It only starts getting relevant when we experience a health emergency, which most people would rather not think about. However, as a single person and therefore single household income earner, we need to make sure our bases are covered. By utilizing some relatively inexpensive insurance policies we can secure the money we’ve worked so hard to earn and increase.